Joseph E. Stiglitz: Overcoming the Copenhagen Failure

The Kyoto approach allocated emission rights, which are a valuable asset. If emissions were appropriately restricted, the value of emission   rights would be a couple trillion dollars a year – no wonder that there is a squabble over who should get them.

Clearly, the idea that those who emitted more in the past should get more emission rights for the future is unacceptable. The “minimally” fair allocation to the developing countries requires equal emission rights per capita. Most ethical principles would suggest that, if one is distributing   what amounts to “money” around the world, one should give more (per capita) to the poor.

So, too, most ethical principles would suggest that those that have polluted more in the past – especially after the problem was recognized in 1992 – should have less right to pollute in the future. But such an allocation would implicitly transfer hundreds of billions of dollars from rich to poor. Given the difficulty of coming up with even $10 billion a year – let alone the $200 billion a year that is needed for mitigation and adaptation – it is wishful thinking to expect an agreement along these lines.

Perhaps it is time to try another approach: a commitment by each country to raise the price of emissions (whether through a carbon tax or emissions caps) to an agreed level, say, $80 per ton. Countries could use the revenues as an alternative to other taxes – it makes much more sense to tax bad things than good things. Developed countries could use some of the revenues generated to fulfill their obligations to help the developing countries in terms of adaptation and to compensate them for maintaining forests, which provide a global public good through carbon sequestration.
We have seen that goodwill alone can get us only so far. We must now conjoin self-interest with good intentions, especially because leaders in some countries (particularly the United States) seem afraid of competition from emerging markets even without any advantage they might receive from not having to pay for carbon emissions . A system of border taxes – imposed on imports from countries where firms do not have to pay appropriately for carbon emissions – would level the playing field and provide economic and political incentives for countries to adopt a carbon tax or emission caps. That, in turn, would provide economic incentives for firms to reduce their emissions.